Income from operations, $151,800 The following events took place for Fed Inc. during October 2012, the first month of operations as a producer of road bikes:

• Purchased $427,000 of materials.
• Used $367,500 of direct materials in production.
• Incurred $315,000 of direct labor wages.
• Applied factory overhead at a rate of 80% of direct labor cost.
• Transferred $892,500 of work in process to finished goods.
• Sold goods with a cost of $848,750.
• Sold goods for $1,500,000.
• Incurred $367,500 of selling expenses.
• Incurred $131,950 of administrative expenses.
1. Prepare the October income statement for Fed. Assume that Fed uses the perpetual inventory method.

To prepare the October income statement for Fed Inc., we need to calculate several values based on the given information.

First, let's calculate the cost of goods manufactured:
1. Purchased materials: $427,000
2. Used direct materials in production: $367,500
3. Direct labor wages: $315,000
4. Factory overhead (80% of direct labor cost): 80% * $315,000 = $252,000
Cost of goods manufactured = Materials purchased - Direct materials used + Direct labor + Factory overhead
= $427,000 - $367,500 + $315,000 + $252,000
= $626,500

Next, let's calculate the cost of goods sold:
1. Cost of goods manufactured: $626,500
2. Transferred work in process to finished goods: $892,500
Cost of goods sold = Cost of goods manufactured - Work in process transferred to finished goods
= $626,500 - $892,500
= -$266,000 (negative value because more goods were transferred to finished goods than were sold)

Now, let's calculate the gross profit:
1. Sales: $1,500,000
2. Cost of goods sold: -$266,000 (as calculated above)
Gross profit = Sales - Cost of goods sold
= $1,500,000 - (-$266,000)
= $1,766,000

Finally, let's calculate the operating profit:
1. Gross profit: $1,766,000
2. Selling expenses: $367,500
3. Administrative expenses: $131,950
Operating profit = Gross profit - Selling expenses - Administrative expenses
= $1,766,000 - $367,500 - $131,950
= $1,266,550

Now we have all the values to prepare the October income statement for Fed Inc.:

Income Statement for October 2012:
----------------------------------
Income from Operations: $151,800
Sales: $1,500,000
Cost of Goods Sold: -$266,000
Gross Profit: $1,766,000
Operating Expenses:
Selling Expenses: $367,500
Administrative Expenses: $131,950
Operating Profit: $1,266,550

To prepare the October income statement for Fed Inc., we need to calculate the following:

1. Net sales: Sales revenue - Cost of goods sold
2. Cost of goods sold: Opening inventory + Purchases - Closing inventory
3. Gross profit: Net sales - Cost of goods sold
4. Operating expenses: Selling expenses + Administrative expenses
5. Operating income: Gross profit - Operating expenses

Given information:
- Sales revenue: $1,500,000
- Cost of goods sold: $848,750
- Selling expenses: $367,500
- Administrative expenses: $131,950

Calculations:
1. Net sales: $1,500,000
2. Cost of goods sold:
Opening inventory: $0 (Assumed)
Purchases: $427,000
Closing inventory: $892,500
Cost of goods sold = $427,000 + $0 - $892,500 = -$465,500 (a negative value indicates an increase in inventory)
3. Gross profit: $1,500,000 - (-$465,500) = $1,965,500
4. Operating expenses: $367,500 + $131,950 = $499,450
5. Operating income: $1,965,500 - $499,450 = $1,466,050

October Income Statement for Fed Inc.:

Net Sales: $1,500,000
Cost of Goods Sold: -$465,500
Gross Profit: $1,965,500
Operating Expenses:
Selling Expenses: $367,500
Administrative Expenses: $131,950
Total Operating Expenses: $499,450
Operating Income: $1,466,050